Question
1.If the Fed uses monetary policy in a way that increases money supply, what effect will this have on interest rates and aggregate demand (consider
1.If the Fed uses monetary policy in a way that increases money supply, what effect will this have on interest rates and aggregate demand (consider them separately)?
Interest rates lower and aggregate demand expands.
2.If the government uses fiscal policy to increase government spending what impact will this have on interest rates and aggregate demand?
Raises interest rates and an increase in aggregate demand.
3.If the government uses fiscal policy and cuts taxes, what effect will this have on interest rates and aggregate demand?
Raises interest rates and an increase in aggregate demand.
Can someone please explain in detail why and how questions 1-3 ended up with given answers?
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